Britain’s meandering track to trade after Brexit

by THE EDITORS/ pic by AFP

YOU might think UK Prime Minister Boris Johnson (picture) — coping unimpressively with the Covid-19 pandemic and related disasters, including this week’s embarrassing U-turn on school examination results — had enough to worry about. But there’s also the small matter of Brexit.

To remind, this involves the complete upheaval of Britain’s trading arrangements a little over four months from now.

By this point, Johnson’s government had hoped to have new trade deals with the European Union (EU), the US and numerous other partners either nailed down or close to it. No such luck.

A promised deal with Japan looks closest to completion, but significant obstacles remain. Talks began some two months ago (the day before yesterday by tradepact standards) and Japan says any pact must be agreed to swiftly to enable legislative approval before the end of the year.

After that, the UK will no longer be covered by the existing agreement between the EU and Japan. Businesses on both sides are desperate to end years of policy uncertainty and avoid disruption to their operations.

That could’ve been accomplished by simply adopting the provisions of the existing EU-Japan agreement, but both sides wanted to go further.

Japan has sought concessions on auto tariffs, digital trade and investor protections that it couldn’t achieve in talks with Europe. UK negotiators have been eager to show they could win greater market access for British goods and services.

The two sides apparently made progress — until discussions ran aground over cheese (a product that wrecks trade talks with surprising regularity).

By now, a deal with the US should also have been completed. Again, the talks are dragging out. Although there’s blame on both sides for this, the fault lies mainly with the UK, which is seeking to maintain EU-like restrictions on the US farm exports.

Brexit was a chance to shed such restrictions — otherwise, what was the point? Britain’s difficulty in both these negotiations is weakening its position in the most important trade talks of all — with the EU.

Both sides want to reach an agreement by early October, to leave time for ratification in their Parliaments, and both have much to lose if that deadline is missed. Both have given some ground.

But London’s failure to make progress elsewhere, or even to lay out a clear strategy for the kinds of deals it wants, will incline Europe toward driving a harder bargain.

With time almost up, Johnson and his team urgently need to prioritise. Their ambition to fashion new and better trade agreements beyond the EU isn’t wrong, and there’ll be opportunities for this in due course. A subsequent agreement with Japan, for instance, could lead to faster liberalisation of trade in services than the EU would’ve provided.

Britain might go on to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which would open up trade and investment opportunities in some of the world’s most dynamic markets. But first things first. Minimising the short-term shock of Brexit — by coming to terms with the EU and rolling over its existing arrangements with non-EU countries — was the crucial goal for this year.

Before it’s too late, Johnson needs to recognise this, and focus squarely on maximum continuity. Brexit proponents promised a vibrant Global Britain would emerge from the shadow of Europe. That was always a reckless pledge.

Now, with time running out, merely containing the short-term damage looks plenty ambitious. — Bloomberg

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.